The short answer
A broker packages your application and shops it to outside funders for a commission, often adding points to your rate. A direct lender underwrites and funds from its own balance sheet, so pricing is set once, decisions come faster, and files that brokers have already shopped and burned can still be approved.
Two Different Businesses Wearing One Label
A direct lender is a company that underwrites, approves, and funds loans from its own capital, while a broker is an intermediary that packages applications and sells them to outside funders for a commission. Both advertise business loans; only one of them actually makes loans.
The distinction is often invisible at the storefront. Many websites promising funding are lead generators or brokerages, and the honest test is a direct question: do you fund from your own balance sheet, and who makes the credit decision on this file? A company that answers with a network, a marketplace, or a panel of partners is a broker, whatever the homepage says.
How Broker Economics Reach Your Rate
Brokers earn commissions from the funder, typically calculated as points on the deal, and on merchant cash advances published broker-practice guides describe a few points to as high as 10 to 15 points of the funded amount. Funders recover that commission in the pricing, so the borrower's factor rate or interest rate rises to carry the broker's cut.
On a $50,000 advance, ten points is $5,000 of cost that exists purely because an intermediary stood between the business and the capital. Some brokers add separate origination or processing fees on top, charged to the borrower directly. The incentive problem compounds it: the broker's commission often rises with the price of the deal, which rewards placing the file where it pays best rather than where it costs least.
The Shopped File Problem
When a broker blasts a file to a dozen funders, every one of them logs it, and many pull credit. A file that appears across half the industry in a week reads as desperate, triggers stacking suspicion, and gets declined by funders who never truly underwrote it. The industry calls these files burned, and the borrower usually never learns why the offers stopped.
A direct lender underwriting in house is not reacting to the shopping trail; it is reading bank statements and making its own credit decision. That is why direct lenders routinely approve files that came back dead from broker networks.
When Each Makes Sense
A capable broker earns its fee when the file is unusual: niche collateral, complex structures, or industries most funders refuse, where knowing the one right home for the deal is genuine value. For standard working capital, term loans, lines, and advances, the broker layer mostly adds cost and days.
Going direct means one application, one credit decision, pricing without embedded commission, and accountability that sits with the company holding the loan. Batch Capital, Batch Group's in house direct lender, underwrites and funds on its own paper at flat, transparent rates, and takes files brokers have declined.
How Do a Broker and a Direct Lender Compare?
Who you hand the file to changes cost, speed, and accountability.
| Broker | Direct lender | |
|---|---|---|
| Role | Shops your file across a lender network | Underwrites and funds with its own capital |
| Cost layer | Commission, typically built into your pricing or charged as points | No intermediary layer; the lender's margin is the whole spread |
| Speed | Adds a matching step; strong brokers still move in days | Fastest path when the file fits the lender's box |
| Reach | One application reaches many programs | One lender's products only |
| Accountability | Varies; the broker does not service the loan | The underwriter, servicer, and workout desk are the same shop |
| Best fit | Unusual files that need shopping | Files that clearly fit; borrowers who want one accountable counterparty |
What Does the Broker Layer Cost in Dollars?
Broker compensation on business funding is commonly structured as points on the funded amount. On a $100,000 advance or loan, each point is $1,000, and multi-point structures are normal in the MCA world.
Worked example: a $100,000 advance at a 1.35 factor costs $35,000 through anyone. If broker points push the offered factor from 1.30 to 1.35 to make room for commission, the borrower paid $5,000 for the introduction. Against that, a broker who places a declined file with a program the borrower could not reach alone is worth every point: the comparison is never broker versus perfect information, it is broker versus the offers you can actually source yourself.
Direct lenders remove the layer but not the need to compare. One direct quote is still one quote.
When Is a Broker the Right Choice?
Brokers earn their layer in real cases. A file with thin credit, short time in business, or an unusual industry needs shopping, and a broker who knows fifty programs' boxes places it faster than fifty applications would. Borrowers without time to run a process benefit from one intake. And when a file has been declined, a broker's decline-to-placement network is often the only practical path.
The direct lender wins when the file is clean and fits: the pricing has no commission layer to carry, the underwriting conversation is with the decision-maker, and if the loan ever needs restructuring you are talking to the same institution that priced it. Batch Capital sits on the direct side and also funds files brokers bring, so both doors lead to the same underwriting desk.
What Questions Expose a Bad Broker Fast?
Good brokers answer these without flinching; bad ones reveal themselves. How are you compensated on this placement, and does a higher factor raise your commission? Any hesitation is your answer. How many lenders will actually see this file, since some shops shop one captive lender while marketing a network. Will you tell me who declined and why, because decline reasons are yours and a broker who hoards them is managing you, not the file. Do you get paid again if I renew, which explains the renewal calls that arrive exactly when your balance is half paid. And will anything you are proposing stack on top of existing obligations, since stacking is where broker incentives and merchant survival part ways most violently. A broker who handles all five in plain language is worth the layer; direct lenders should get the same questions minus the commission one.
How Do You Protect Yourself Either Way?
Five checks apply to any path.
- Ask the broker directly how they are compensated and whether it affects your rate
- Get at least one direct quote to benchmark any brokered offer
- Compare total repayment dollars, not headline rates or factors
- Confirm who services the loan and who to call if revenue dips
- Watch for stacking pressure: a broker paid per placement has an incentive you do not
Commonly Asked Questions
- How do business loan brokers get paid?
- By commission from the funder, typically points on the funded amount, sometimes 10 points or more on merchant cash advances. That cost is built into the borrower's rate, and some brokers charge separate fees on top.
- Is it cheaper to go to a direct lender than a broker?
- Usually, yes. Direct lenders price without an embedded broker commission, which on advances can equal several thousand dollars of a typical deal's cost.
- What does it mean when a file has been shopped or burned?
- It means a broker sent the application to many funders in a short window, so the file appears everywhere with multiple credit pulls. Funders read that as risk and decline, though a direct lender doing its own underwriting can still approve it.
- Do brokers get better rates than going direct?
- Sometimes. A broker's volume relationship with a lender can offset their commission, and for hard-to-place files the brokered offer may be the only offer. For clean files, a direct quote is usually the benchmark to beat.
- How do business loan brokers get paid?
- Commonly in points on the funded amount, paid by the lender and priced into your deal. Reputable brokers disclose the structure when asked. If a broker will not answer the compensation question plainly, that is the answer.
- Is Batch Capital a broker or a direct lender?
- A direct lender. Batch Capital underwrites and funds with its own capital, works directly with merchants, and also serves as the funding source behind brokers' deal flow, including reviving files other lenders declined.
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